Macroeconomics

‭produce,‬‭how‬‭to‬‭produce,‬‭and‬‭for‬‭whom‬‭to‬‭produce‬‭are‬‭controlled‬‭by‬‭the‬‭state.‬‭In‬‭addition,‬‭the‬ ‭state‬‭has‬‭ownership‬‭of‬‭productive‬‭resources‬‭and‬‭property,‬‭meaning‬‭that‬‭the‬‭market‬‭has‬‭no‬‭real‬ ‭role in the allocation of resources.‬

‭North Korea and Cuba are as close to planned economies as the theory suggests.‬

‭It‬‭is‬‭important‬‭to‬‭avoid‬‭the‬‭common‬‭misconception‬‭that‬‭the‬‭classifcation‬‭of‬‭economies‬‭is‬‭exact‬‭because‬ ‭both‬‭market‬‭and‬‭planned‬‭economies‬‭in‬‭their‬‭true‬‭forms‬‭only‬‭exist‬‭in‬‭theory.‬‭Instead,‬‭a‬‭mixed‬‭economy‬‭is‬ ‭the typical economic system.‬ ‭●‬ ‭Mixed‬ ‭Economy:‬ ‭In‬ ‭a‬ ‭mixed‬ ‭economic‬ ‭system,‬ ‭both‬ ‭the‬ ‭private‬ ‭sector‬ ‭(individuals‬ ‭and‬ ‭private‬ ‭frms)‬ ‭and‬ ‭the‬ ‭public‬ ‭sector‬ ‭(the‬ ‭government)‬ ‭have‬ ‭a‬ ‭role‬ ‭in‬ ‭allocating‬ ‭resources.‬ ‭Decisions‬‭consist‬‭of‬‭an‬‭interaction‬‭between‬‭individuals,‬‭private‬ ‭frms,‬‭labor,‬‭and‬‭the‬‭government.‬‭There‬‭is‬‭private‬‭ownership‬‭of‬ ‭assets as well as some public ownership.‬ ‭C. Factors of Production‬ ‭When‬ ‭defning‬ ‭economics,‬ ‭there‬ ‭is‬ ‭always‬ ‭a‬ ‭mention‬ ‭of‬ ‭the‬ ‭allocation‬ ‭of‬ ‭scarce‬ ‭resources‬ ‭to‬ ‭satisfy‬ ‭needs and unlimited wants; but what are these resources?‬ ‭The‬‭resources‬‭available‬‭in‬‭an‬‭economy‬‭are‬‭referred‬‭to‬‭as‬‭the‬ ‭factors‬‭of‬‭production‬ ‭.‬‭They‬‭are‬‭the‬‭means‬ ‭by which an economy produces goods and services.‬

‭There are 4 main types of factors of production:‬

‭Land:‬ ‭This‬‭refers‬‭to‬‭all‬ ‭natural‬‭resources‬ ‭used‬‭in‬‭production,‬‭such‬‭as‬‭minerals,‬ ‭forests,‬ ‭water‬ ‭bodies,‬‭and‬‭agricultural‬‭land,‬‭as‬‭well‬‭as‬‭other‬‭resources‬‭like‬‭oil‬ ‭and‬‭natural‬‭gas.‬‭Land,‬‭as‬‭a‬‭factor‬‭of‬‭production,‬‭plays‬‭a‬‭vital‬‭role‬‭in‬‭the‬‭creation‬ ‭of‬‭goods‬‭and‬‭services.‬‭It‬‭provides‬‭the‬ ‭raw‬‭materials‬ ‭necessary‬‭for‬‭production,‬ ‭serving‬ ‭as‬ ‭the‬ ‭foundation‬ ‭upon‬ ‭which‬ ‭economic‬ ‭activities‬ ‭are‬ ‭built.‬ ‭Natural‬ ‭resources‬ ‭derived‬ ‭from‬ ‭land‬ ‭are‬ ‭transformed‬ ‭into‬ ‭intermediate‬ ‭or‬ ‭fnished‬ ‭goods through various production processes.‬

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